Gold and Silver Prices Fall Due to Market Turmoil and Recession Fears

Gold prices dropped more than 2% in a turbulent trading session on Monday as investors sold off positions amid a broader equity market selloff. By 1139 GMT (0400 IST), spot gold had decreased 2% to $2,393.66 per ounce, while U.S. gold futures declined 1.4%, closing at $2,434.10.

The widespread market turmoil caused Japanese shares to plunge, exceeding losses seen during the 1987 Black Monday. This decline was fueled by escalating fears of a U.S. recession, leading investors to offload riskier assets. Recent statistics showed the U.S. unemployment rate rose to 4.3% in July, which heightened expectations that the Federal Reserve might reduce interest rates by up to 50 basis points in September.

Typically considered a safe-haven asset, gold usually performs well when interest rates are low. However, the prevailing market sentiment has resulted in a decrease in bullion prices. Other precious metals also saw declines: spot silver dropped 5.7% to $26.92 per ounce, platinum fell 4.1% to $918.35, and palladium decreased 4.5% to $849.05, its lowest since August 2018. These metals have been pressured by concerns over long-term risks associated with the shift to net-zero emissions.

As per Moneycontrol, gold prices in the local market went up by ₹250 to ₹72,800 per 10 grams due to higher demand from jewelers, following a previous session drop to ₹72,550 per 10 grams. Silver prices continued to fall for the third day in a row, dropping ₹1,300 to ₹84,200 per kg due to reduced demand from coin makers and industrial users. Silver had previously closed at ₹85,500 per kg.

As for Gold of 99.5% purity rose by ₹250 to ₹72,450 per 10 grams, up from ₹72,200 per 10 grams in the prior session. Internationally, Comex gold was traded at $2,461.10 per ounce, down $8.70 from the previous close. Silver in New York was quoted lower at $27.47 per ounce.

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On the Multi Commodity Exchange (MCX), Gold Futures 4-Oct-2024 delivery fell by ₹309 or 0.44% to ₹69,480 per 10 grams, hitting an intra-day low of ₹69,453 per 10 grams. Silver contracts for September delivery also decreased, falling ₹2,719 or 3.3% to ₹79,774 per kg on the MCX.

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“Gold and silver experienced significant volatility last week, with gains in the international markets. Gold prices hit a lifetime high amid hopes for Fed rate cuts and disappointing US job data. Silver followed, surpassing $28.50 per troy ounce. However, both precious metals failed to maintain these highs, declining after weaker-than-expected US job reports and factory orders data increased recession fears. Additionally, the Japanese Yen's strong performance against the US dollar added to global financial market volatility. Despite this, gold and silver prices dipped from their peaks but found support due to dollar weakness and rising tensions in the Middle East. Gold has support at $2418-2398 and resistance at $2454-2474. Silver has support at $28.10-27.88 and resistance at $28.64-28.85," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

Bullion, commonly seen as a hedge against geopolitical and economic uncertainties, tends to do well when interest rates are low. However, concerns about a potential recession have driven down prices for other precious metals.

“Gold prices opened strong in Comex, starting near $2,440 and rallying to $2,455, pushing MCX Gold to ₹70,500. However, panic triggered by the Japanese Yen and the Bank of Japan has led to a sell-off in gold. With US interest rates still high, gold has faced resistance on recent rises, especially around ₹70,500. A potential preemptive US interest rate cut could boost gold buying, particularly given recent US economic data has not been supportive. Therefore, the expected price range for gold is between ₹69,000 and ₹71,000, with likely volatility in upcoming sessions,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

Spot silver dropped 5.7% to $26.92, platinum fell 4.1% to $918.35, and palladium decreased 4.5% to $849.05, hitting its lowest level since August 2018.

Platinum and palladium, essential in reducing emissions in engine exhaust systems, are under pressure due to long-term risks related to the transition to net-zero emissions.